Report from Brazil

Pharmaceutical demand in Brazil continues to grow steadily with sales figures expected to reach $87 billion in 2017 according to IMS Health. It is anticipated that the country will become the fourth largest global market for pharmaceuticals by 2016, leading the Latin American region.

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Brazil has come a long way since its era of high inflation, achieving low national debt, with a rapidly growing middle class hungry for almost anything money can buy, including top-notch electronics, imported automobiles, international vacations, and MBA courses. In addition, access to private healthcare, an expansion of the generic-drug market through government policies, as well as the increased national healthcare services along with better business regulations have attracted the eyes of international pharmaceutical companies.

"Brazil, compared with its emerging counterparts, presents an important advantage [for international companies] because we are a democratic country with knowledge in the law field, have institutions that work properly as well as [the benefits of] free press and judicial resources," says Antônio Britto, executive president of São Paulo-based Interfarma (a pharmaceutical research industry association). Britto adds that this environment presents Brazil's main differential, followed by the fact that emerging markets have been expanding mainly on common or popular pharmaceutical products amid the rising purchase powers in these regions.

Why the change?
Pharmaceutical companies around the world are aware that the industry is currently facing a strategic crisis. According to Roland Berger Strategy Consultants, this crisis means that business models must be adjusted given the shrinking margins of pharmaceutical companies as a result of increasing pricing pressure, regulatory changes, and expiring patents.

Emerging markets show strong growth despite the lower margins, driven heavily by non-patent-protected products. According to data from Roland Berger Strategy Consultants, the biggest growth opportunities for the pharmaceutical industry would be in such markets because these regions are set to rise to nearly 40% by 2016. The firm believes that greater efficiency in research and more collaboration with third-party providers will become increasingly important given that R&D costs have risen by more than 80% worldwide over the past 10 years, while the number of new product launches has dropped by 43%.

Interfarma's Antônio Britto notes that there has been a rise of global pharma dynamics in the past five years, moving from the US, Europe, and Japan towards emerging markets such as Brazil, Mexico, Russia, and Turkey. Brazil, China, India, and Russia have been experiencing above-average growth rates with emerging markets expected to account for nearly 40% of the global market for pharmaceuticals by 2016. Focusing on high-growth markets could, therefore, be a solution to the crisis for the pharmaceutical industry. Figures from Roland Berger Strategy Consultants show that the market for pharmaceutical products will grow by 4.5% annually on average through 2016, while growth in emerging markets will increase by approximately 12%.